Tax credits being overpaid

2 June 2014

tax letter According to the Citizens Advice Bureau, there has been a sharp rise in tax credit overpayments. The charity claim that in the year to March 2014, there was a 14% increase in people getting into financial difficulties as a result.

Yet HM Revenue and Customs (HMRC) have denied that people are being harassed to repay what they owe.

The overpayments happen when people's income rises unexpectedly. They are then asked to pay back money they have received from Child or Working Tax Credits, and in some cases people have been asked to repay £7,000 after their circumstances changed.

Citizens Advice said it handled nearly 30,000 such cases last year.

Listen to the voice of Gillian Guy, chief exec of the CAB: "For thousands of families, Whitehall calculations are leading to household debt. Tax Credits are there to make sure people get a decent standard of income, but the sharp rise in debts from overpaid tax credits suggests this policy is having the opposite effect."

More than £1.5bn was overpaid to claimants in the year 2012-13. However HMRC has hit back at the claims, saying underpayments and overpayments are a necessary part of the system. Releasing new figures, it said there were 1.5 million overpayments in 2012-13, down from 1.6 million the previous year.

HMRC now uses private debt collection agencies to help recover the tax credits it is owed. Last year, it made 215,000 such referrals.

From 2015, HMRC will be given the power to take money directly from people's bank accounts, providing they are left with £5,000 in the account.

Which all sounds like it's going to be a smooth and unstressful affair.

TOPICS:   How To Guides

What do you think?

Connect with Facebook, Twitter, or just enter your email to sign in and comment.

Your comment